Microsoft sued over search-related patents

The interior of a Microsoft retail store is seen in San Diego January 18, 2012.

NEW YORK (Reuters) - A lawsuit filed on Thursday alleges Microsoft Corp has been infringing patents that allow Internet search engines to most effectively place advertisements.

I/P Engine Inc said in the suit filed in Manhattan federal court that Microsoft uses search technology based on inventions by two employees of I/P Engine's parent company, Vringo Inc.

Microsoft uses the technology in systems that generate advertisements and associated links for users of the world's largest software company's search engine, Bing, the lawsuit said.

Microsoft did not immediately respond to a request for comment. A spokesman for Vringo declined to comment.

In November 2012, a Virginia jury awarded I/P Engine approximately $30 million in damages after it found that companies including Google Inc and AOL Inc had infringed the same patents that are at issue in the Microsoft suit.

Following I/P Engine's announcement of the verdict, however, its parent company's stock slid by as much as 10 percent. The company had been seeking damages of at least $696 million.

In the lawsuit filed Thursday, I/P Engine claimed that Microsoft has willfully infringed its patents. I/P Engine said that one of its patents was referenced by the U.S. Patent and Trade Office in 2003 when the agency rejected a similar Microsoft patent application.

In patent cases, a party can win higher damages if infringement is found to be willful.

Vringo shares were last up 10 cents, or 3.2 percent, at $3.24 in midday trade on the American Stock Exchange.

Microsoft shares were down 30 cents, or 1.1 percent, at $27.55 on the Nasdaq.

The case is I/P Engine, Inc v. Microsoft Corp, U.S. District Court for the Southern District of New York, No. 12-688.

(Reporting by Erin Geiger Smith, editing by G Crosse)